How Long Do I Have to Roll Over a Roth IRA?
Changing economic conditions may warrant moving money from one retirement account to another. Be sure you understand the regulations for rolling over your Roth IRA so that you don't incur unwanted tax payments and penalties.
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Definition
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A Roth IRA is an individual retirement account that is funded with "after-tax" dollars. You won't get a tax deduction by contributing to a Roth IRA; however, the benefit is that your money will grow tax free and will not be taxed upon withdrawal, provided that all the rules of the Roth IRA have been met.
Time Frame
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You have 60 days in which to roll over over money between retirement accounts. If you fail to re-deposit retirement funds into another IRA, you may be subject to taxes and a 10 percent early withdrawal penalty if you are not yet age 59½.
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Implications
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If you are rolling over funds from a traditional IRA or a 401(k) into a Roth IRA, you will be required to pay tax on the rollover amount. Contributions to traditional IRAs and 401(k) accounts are made with pre-tax dollars, so you must claim the rollover amount as income in the year you conduct the transaction.
Considerations
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If you roll over a traditional IRA or 401(k) into a Roth IRA, you should have separate funds with which to pay your tax liability. Otherwise, the money you withdraw from the retirement account to pay the taxes is considered a distribution and you will pay a 10 percent penalty in addition to regular income tax if you are younger than 59½.
Direct Transfer
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You can use a direct transfer to move money between retirement accounts. Also called a trustee-to-trustee rollover, one financial institution sends your money directly to another custodian rather than to you.
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